SPECIAL  INSTRUCTIONS 


TO  ASSESSING  OFFICERS 


ON  THE 


MORTGAGE  TAX  LAW 

(Chapter  378,  1903.) 


y / 

ISSUED  BY  THE 

Wisconsin  State  Tax  Commission, 
1903. 


MADISON,  WIS. 

Democrat  Printing  Co.,  State  Printer. 
1904. 


33  6. 2L* 

W 7 56^ 


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The  Mortgage  Tax  Law. 


Wisconsin  State  Tax  Commission. 

Madison,  June  17,  1903. 

To  Assessing  Officers: 

This  office  is  in  receipt  of  many  inquiries  from  assessing  offi- 
cers and  others  asking  an  interpretation  of  various  provisions 
of  chapter  378,  laws  of  1903,  relating  to  the  assessment  and 
taxation  of  mortgages  and  mortgaged  real  estate.  While  some 
of  the  questions  presented  primarily  affect  only  the  private 
rights  of  mortgagors  and  mortgagees  they  also  indirectly  alfect 
assessing  officers  in  the  performance  of  their  duties  and  man) 
of  such  questions  relate  directly  to  the  administrative  duties  of 
assessing  officers. 

This  circular  is  written  for  the  purpose  of  explaining  the 
general  features  of  the  law  so  far  as  they  seem  to  require  ex- 
planation, and  to  aid  assessing  officers  in  the  administration 
thereof,  and  with  the  view  also  of  answering  so  far  as  practi- 
cable the  inquiries  above  mentioned.  Inasmuch  as  the  act  in 
question  deals  directly  with  the  private,  relations  of  mortgagors 
and  mortgagees  some  discussion  of  questions  affecting  their 
rights  will  be  unavoidable,  in  so  far  as  such  questions  relate  to 
or  affect  assessing  officers  in  the  performance  of  their  duties, 
although  it  is  not  the  province  of  the  commission  to  advise  pri- 
vate individuals  upon  matters  affecting  their  personal  rights 
and  obligations. 

For  convenient  reference  a copy  of  the  act  is  printed  and 
furnished  as  an  appendix  to  this  circular. 


1081 


5 


4 — 


WIIAT  MORTGAGES  ARE  AFFECTED. 

Section  1 of  said  act  provides: 

“For  the  purposes  of  this  act  the  term  ‘mortgage’  shall  be 
construed  to  include  every  mortgage  or  other  conveyance  of 
real  estate  and  every  lien  thereon  created  by  contract,  given  or 
intended  as  security  for  the  payment  of  money,  and  shall  also 
include  the  indebtedness  secured  to  be  paid  by  such  mortgage 
or  other  conveyance  or  lien.” 

But  it  is  not  to  be  inferred  from  the  above  definition  that 
everything  thereby  declared  to  be  a “mortgage”  is  to  be  assessed 
by  the  special  method  provided  in  the  act.  It  is  expressly  de- 
clared in  section  8 that, 

“All  provisions  of  law  whereby  mortgages  of  real  estate  held 
by  insurance  companies  or  other  persons  or  associations  are  ex- 
empted from  taxation,  either  expressly  or  by  necessary  implica- 
tion shall  remain  unaffected  by  the  provisions  of  this  act.” 

Under  the  statutes  in  force  prior  to  the  enactment  of  said 
chapter  378,  mortgages  held  by  banks,  trust  companies,  insur- 
ance companies  and  various  other  associations  or  corporations 
assessed  by  a state  board  of  assessment  or  taxed  by  license  fee 
or  other  special  method  in  lieu  of  direct  taxation  upon  a valua- 
tion made  by  local  assessors,  were  not  liable  to  assessment  by 
town,  city  and  village  assessors.  As  to  all  mortgages  which 
were  thus  or  otherwise  exempt  from  direct  assessment  and 
taxation,  the  law  has  not  been  changed,  but  such  mortgages  con- 
tinue to  be  exempt  as  heretofore.  This  is  the  necessary  effect 
of  the  provisions  in  section  8,  quoted  above. 

Section  9 designates  certain  other  classes  of  mortgages  which 
are  not  subject  to  the  special  method  of  assessment  prescribed 
by  the  new  law,  viz. : 

(1)  Mortgages  upon  lands  assessed  by  a state  board  of  as- 
sessment. Under  present  laws  the  properties  of  railroad,  ex- 
press, sleeping  car,  freight  line  and  equipment  companies  are 
required  to  be  assessed  by  a state  board  of  assessment,  and  are 
not  liable  to  assessment  by  local  officers.  Such  state  assessr 


— 5 — 


ment,  however,  covers  only  such  property  of  the  companies 
named  as  is  used  in  the  business  of  such  companies  respectively. 
Such  of  their  real  estate  as  is  not  so  used  is  subject  to  assess- 
ment by  local  officers  under  the  general  assessment  laws;  and 
mortgages  upon  such  last  mentioned  real  estate  are  subject  to 
the  special  method  provided  in  the  new  law,  provided,  of  course 
that  the  mortgages  themselves  are  not  excluded  under  the  pro- 
visions of  section  8 explained  above. 

(2)  Mortgages  upon  real  estate  of  persons , associations  or 
corporations  taxed  by  license  fee  or  other  special  method  in  lieu 
of  taxation  upon  the  mortgaged  property.  Under  present  laws, 
street  railway,  telegraph  and  telephone  companies,  life  and  fire 
insurance  companies,  trust  companies  and  some  other  organiza- 
tions are  taxed  by  license  fee  or  other  special  method  in  lieu  of 
direct  taxation  under  the  general  assessment  laws.  As  to  some 
of  such  companies  the  exemption  from  taxation  by  local  assess- 
ment under  general  laws,  by  reason  of  such  special  method,  ex- 
tends to  all  their  property.  As  to  others,  such  exemption  ex- 
tends to  part  of  their  property  only.  In  cases  where  the  real 
estate  is  thus  exempt,  mortgages  thereon  are  not  subject  to  the 
special  method  of  assessment  provided  by  the  new  act  of  1903 ; 
but  if  any  such  real  estate  is  not  so  exempt  such  special  method 
of  assessment  is  applicable  to  mortgages  thereon, — provided  of 
course  that  the  mortgages  themselves  are  not  exempt  under  the 
provisions  of  section  8 already  explained. 

(3)  Mortgages  upon  lands  exempt  from  taxation  under  any 
other  provisions  of  law.  In  addition  to  exemptions  on  account 
of  some  special  method  of  taxation  mentioned  in  the  preceding 
paragraph,  there  are  various  other  exemptions  of  real  estate 
from  taxation.  These  exemptions  are  so  well  known  that  the 
laws  granting  them  need  not  be  referred  to  in  this  connection. 
As  to  all  mortgages  upon  exempt  lands  the  special  method  of 
assessment  prescribed  by  the  act  of  1903  does  not  apply.  It 
could  not  apply  without  destroying  the  exemption  in  part  at 
least  The  last  clause  of  section  9 was  evidently  designed  to 


prevent  such  result  as  well  as  to  declare  the  rule  in  the  case 
stated  in  this  paragraph. 

There  are  mortgages  not  liable  to  taxation  under  former 
laws  which  are  subject  to  assessment  under  the  special 
method  prescribed  by  said  chapter  378,  viz. : mortgages 
held  by  non-residents  of  the  state  on  lands  within  the 
state  liable  to  taxation  under  the  general  assessment  laws.  Un- 
der former  laws,  such  mortgages  were  deemed  to  be  and  could 
be  considered  as  personal  property  only,  and  as  such  were  tax- 
able only  in  the  district  in  which  the  owner  resided,  and  were 
therefore  not  taxable  in  this  state  when  owned  by  a non-resi- 
dent. State  ex  rel.  Dwinnell  vs.  Gaylord,  73  Wis.,  316.  But 
under  the  provisions  of  the  new  law,  a mortgage  on  taxable  real 
estate  in  this  state  (except  in  the  cases  already  mentioned)  is 
no  longer  treated  as  personal  property,  but  is  declared  to  be  an 
interest  in  the  real  estate  subject  to  such  mortgage  and  to  be 
taxable  as  such  interest  in  the  district  in  which  the  mortgaged 
premises  are  located.  JSTo  distinction  is  made  in  this  respect 
between  mortgages  held  by  residents  and  mortgages  held  by 
non-residents.  The  language  of  the  statute  is  sufficiently  com- 
prehensive to  apply  to  both  classes  of  mortgages.  The  validity 
of  a statute  which  thus  includes  mortgages  held  by  non-resi- 
dents seems  to  be  affirmed  by  the  decision  of  the  United  States 
supreme  court  in  the  case  of  Savings  & Loan  Society  vs.  Multi 
nomah  Oo.,  169  U.  S.,  421,  as  to  mortgages  executed  subse- 
quent to  the  enactment  of  such  statute.  There  is  some  question 
whether  the  law  should  be  construed  as  applicable  to  mortgages 
held  by  non-residents  which  were  executed  before  the  law  took 
effect.  The  question,  however,  is  one  affecting  the  private 
rights  of  the  parties  to  the  mortgage  rather  than  the  public. 
If  assessors  should  treat  the  law  as  applicable  to  such  mort- 
gages and  assess  them  as  interests  in  the  mortgaged  real  estate, 
the  rights  of  the  parties  would  not  be  concluded  by  such  action 
on  their  part.  Whether  assessors  do  this  or  not  is  not  a mat- 
ter of  public  importance,  for  the  same  aggregate  valuation  will 
appear  upon  the  assessment  rolls  in  either  case.  This  will  be 
understood  more  clearly  later  on  in  this  discussion. 


— 7 — 


From  the  foregoing  it  may  be  seen  that  the  changes  accom- 
plished by  the  new  law  relate  to  mortgages  on  taxable  real 
estate  in  this  state  which  under  the  former  law  were  subject  to 
assessment  as  personal  property  in  the  assessment  district  in 
which  the  mortgagee  resided,  and  also  to  mortgages  on  such  real 
estate  held  by  non-residents  of  the  state,  if  not  otherwise  ex- 
empt under  former  provisions  of  law.  As  to  all  other  mort> 
gages  the  former  laws  remain  unchanged.  In  the  discussion 
which  follows,  the  word  “mortgage”  will  be  understood  to  refer 
to  such  mortgages  as  are  subject  to  the  special  method  of  assess- 
ment provided  in  the  act  of  1903  unless  a contrary  meaning  is 
indicated  in  connection  with  the  use  of  the  word. 

CHIEF  PROVISIONS  OF  THE  LAW. 

As  to  all  mortgages  coming  under  the  provisions  of  the  law, 
it  is  provided  that  each  such  mortgage, 

“shall  be  deemed  an  interest  in  such  [the  mortgaged]  real 
estate  and  shall  be  assessed  as  such  interest  in  the  assessment 
district  in  which  such  real  estate  is  located,  and  not  otherwise, 
and  may  be  separately  assessed  and  taxed  as  hereinafter  pro- 
vided. When  so  separately  assessed  the  interest  of  the  mort- 
gagor in  such  real  estate  shall  be  assessed  for  only  such  value 
or  amount  as  shall  remain  after  deducting  the  assessed  value  of 
the  interest  of  the  mortgagee  from  the  assessed  value  of  the 
entire  real  estate.” — (Sec.  2). 

This  section  accomplishes  some  radical  changes  in  the  former 
laws  respecting  the  assessment  of  such  mortgages  as  are  subject 
to  the  special  method  prescribed  by  the  new  statute.  Instead 
of  being  assessed  as  personal  property,  such  mortgages  are  re- 
quired to  be  assessed  as  an  interest  in  real  estate.  Instead  of 
being  assessed  in  the  district  in  which  the  mortgagee  resides, 
they  are  to  be  assessed  in  the  district  in  which  the  mortgaged 
real  estate  is  located.  And  these  requirements  are  to  be  ob- 
served when  both  interests  are  assessed  together  as  well  as  when 
the  interest  of  the  mortgagee  is  assessed  separately.  In  other 
words,  such  mortgages  cannot  in  any  case  be  assessed  as  per- 


— 8 — 


sonal  property,  nor  in  the  district  in  which  the  owner  resides 
if  his  residence  is  not  in  the  district  in  which  the  mortgaged 
real  estate  is  located,  but  can  be  assessed  only  as  an  interest  in 
the  mortgaged  real  estate  in  the  district  in  which  such  real 
estate  is  located. 

It  has  been  reported  to  thisi  office  that  in  some  assessment  dis- 
tricts such  mortgages  have  been  included  in  the  personal  prop- 
erty assessment  of  persons  residing  therein,  for  the  year  1903, 
and  were  so  included  before  the  act  of  1903  was  published  and 
took  effect.  The  question  is  presented  whether  such  personal 
property  assessments  must  be  changed  by  deducting  therefrom 
the  amounts  included  therein  on  account  of  such  mortgages,  so 
as  to  bring  the  assessment  into  compliance  with  the  law  in  its 
present  form.  It  is  considered  that  such  change  is  necessary 
and  must  be  made,  and  such  personal  property  assessments  must 
be  reduced  accordingly.  Otherwise,  it  is  believed,  such  per- 
sonal property  assessments  would  be  invalid  to  the  extent  of  the 
amount  included  therein  on  account  of  such  mortgages.  It  is 
true  that  (with  certain  exceptions  which  need  not  now  be  no- 
ticed) the  law  required,  and  still  requires,  the  assessment  of 
personal  property  to  be  made  as  of  the  first  day  of  May;  that 
the  new  law  was  not  in  force  until  the  23rd  day  of  May ; that 
up  to  the  last  mentioned  date  the  laws  required  such  mortgages 
to  be  assessed  as  personal  property  in  the  district  in  which  the 
mortgagee  resided,  and  therefore  that  the  inclusion  of  such 
mortgages  in  the  mortgagee’s  assessment  of  personal  property 
prior  to  the  23rd  day  of  May  was  lawful  at  the  time.  But  the 
new  statute,  in  section  10,  expressly  declares  that  it  a shall  ap- 
ply to  the  assessment  to  be  made  in  the  year  1903.”  This  lan- 
guage is  construed  to  refer  to  the  entire  assessment  of  that  year 
— to  the  parts  of  the  work  then  already  done  as  well  as  to  the 
parts  thereafter  to  be  done.  It  is  not  doubted  that  the  legisla- 
ture has  authority  to  amend  and  change  the  laws  and  rules  for 
the  assessment  of  property  during  the  time  an  assessment  is  in 
progress  and  to  make  such  legislation  relate  back  and  apply  to 
such  pending  assessment  in  its  entirety,  provided  constitutional 


— 9 — 


restrictions  are  otherwise  observed,  even  though  such  legisla- 
tion should  render  it  necessary  to  revise  and  do  over  some  part 
of  the  work  already  done  upon  such  assessment.  The  work  of 
the  assessor  is  always  subject  to  revision  by  himself  until  the 
roll  is  completed  and  submitted  to  the  board  of  review  and  the 
assessment  itself  is  inchoate  and  subject  to  revision  and  change 
until  the  work  of  the  board  of  review  is  ended.  Until  the 
assessment  is  completed  the  rights  of  the  taxpayers  have  not  be- 
come fixed  or  vested  in  any  legal  sense  so  as  to  preclude  the 
legislature  from  enacting  any  and  all  laws  affecting  the  assessr 
ment  which  it  had  power  to  enact  prior  to  the  time  the  work  of 
assessment  was  begun.  It  is  regretted  that  assessors  should  be 
required  in  this  way  to  revise  work  which  when  done  was  in 
accordance  with  laws  then  in  force,  but  the  situation  cannot 
now  be  changed  and  there  is  no  course  to  be  pursued  except  to 
revise  the  assessment  and  bring  it  into  compliance  with  the  law 
as  it  is  now  enacted. 

SEPARATE  ASSESSMENT WHEN  REQUIRED,  WHEN  NOT. 

Section  3 of  said  chapter  378  provides  that: 

“At  the  option  of  the  mortgagor  both  such  interests  may  be 
assessed  and  taxed  together,  without  separate  valuation,  to  the 
mortgagor  or  occupant,  the  same  as  unincumbered  real  estate. 
In  such  case  the  combined  valuation  of  both  interests  shall  not 
exceed  the  just  valuation  which  should  be  placed  upon  such  real 
estate  if  unincumbered.” 

One  of  the  questions  presented  under  this  and  other  provi- 
sions of  the  act,  is  whether  the  interest  of  the  mortgagee  must  be 
separately  assessed  in  every  case  where  the  mortgagor  does  not 
exercise  the  option  given  him  in  section  3,  by  requesting  or  con- 
senting to  the  assessment  of  both  interests  together.  It  is  ob- 
served that  the  provision  for  separate  assessment  in  section  2 
is  permissive,  not  mandatory,  in  form,  the  word  may  instead  of 
shall  being  used ; also  that  the  provision  in  section  3 for  assess- 
ment of  both  interests  together  is  in  like  manner  permissive  and 
not  mandatory  in  form.  It  is  considered,  however,  that  this 


— 10- 


form  of  statement  is  not  to  be  construed  as  vesting  in  the  as- 
sessor any  discretionary  authority  to  determine  whether  or  not 
a separate  assessment  shall  be  made.  To  do  so  would  make  it 
possible  to  defeat  the  evident  intention  of  the  legislature  to  per- 
mit the  mortgagor  to  determine  whether  the  two  interests  shall 
be  assessed  separately  or  together.  Otherwise  he  would  have 
no  ‘‘option.”  It  is  a well  settled  rule  that  the  word  may  is  to 
be  construed  as  meaning  must  or  shall  when  necessary  to  accom- 
plish the  intent  of  the  legislature  as  gathered  from  the  pro- 
visions of  the  act,  all  of  them  being  considered,  or  when  neces- 
sary to  save  or  secure  the  rights  of  persons  which  may  be  af- 
fected or  prejudiced  under  a different  construction.  Cutler  v. 
Howard,  9 Wis.,  309.  Looking  to  all  the  provisions  of  the  act 
it  will  be  readily  perceived  that  the  chief  ends  or  purposes 
sought  to  be  accomplished  are  twofold:  (1)  To  avoid  or  do 
away  with  the  extra  burden  (considered  by  some  to  be  double 
taxation,  in  effect)  resulting  from  the  assessment  of  the  mort- 
gage debt  to  the  mortgagee  as  personal  property  and  the  assess- 
ment of  the  mortgaged  premises  to  the  mortgagor  at  its  full 
value,  relatively  with  other  property,  without  deduction  on  ac- 
count of  the  mortgage  debt;  (2)  To  secure  to  the  mortgagor, 
so  far  as  lies  in  the  power  of  the  legislature,  the  right  to  com- 
pel the  mortgagee  to  bear  the  burden  of  the  tax  upon  his  mort- 
gage considered  as  an  interest  in  the  mortgaged  real  estate.  To 
accomplish  this  last  mentioned  purpose  provision  is  made  for 
the  assessment  and  taxation  of  the  mortgagee’s  interest  sepa- 
rately from  the  interest  of  the  mortgagor,  and  the  mortgagor  is 
given  the  right  to  pay  the  tax  upon  the  mortgagee’s  interest  and 
deduct  the  amount  paid  from  the  mortgage  debt  These  pro- 
visions being  intended  for  the  protection  of  the  rights  of  the 
mortgagor,  it  cannot  be  presumed  that  the  legislature  intended 
to  vest  the  assessor  with  authority  in  his  discretion  to  jeopardize 
or  destroy  such  rights  by  omitting  to  make  the  separate  assess- 
ment of  the  mortgagee’s  interest.  It  was  evidently  recognized 
by  the  legislature  that  in  some  instances,  the  right  of  offset 
above  mentioned  would  not  be  available  to  the  mortgagor,  by 


— 11- 


reason  of  an  agreement  on  his  part  to  pay  the  tax  on  the  mort- 
gagee’s interest  or  otherwise,  and  that  in  such  cases  the  sepa- 
rate assessment  of  the  interest  of  the  mortgagee  would  be  a 
useless  formality ; hence  the  provision  for  assessing  both  inter- 
ests together  in  some  cases.  But  by  giving  to  the  mortgagor 
the  option  mentioned,  the  statute  contemplates  that,  as  between 
him  and  the  assessor,  he  is  sole  judge  of  the  availability  of 
such  right  of  offset  and  is  not  to  be  controlled  by  the  assessor 
in  the  matter  of  separate  assessment. 

This  construction  of  the  statute  is  confirmed  by  the  legisla- 
tive history  of  the  act.  An  amendment  to  the  original  bill  was 
adopted  in  one  branch  of  the  legislature  providing  among  other 
things  that  the  interests  of  the  mortgagor  and  mortgagee  should 
be  assessed  together  the  same  as  if  the  real  estate  were  not  in- 
cumbered,  unless  the  mortgagor  or  mortgagee  should  request 
that  such  interests  be  separately  assessed  and  furnish  to  the  as- 
sessor such  information  as  would  enable  him  to  make  such  sep- 
arate assessment.  But  this  amendment  was  rejected  in  the  other 
branch  of  the  legislature  and  the  bill  was  finally  passed  in  its 
present  form.  This  indicates  the  intention  of  the  legislature 
to  have  the  mortgagee’s  interest  separately  assessed  unless  the 
mortgagor  should  elect  to  have  both  interests  assessed  together. 

Correspondents  have  asked,  whether,  in  case  a mortgage  con- 
tains a stipulation  on  the  part  of  the  mortgagor  to  pay  all  taxes 
which  shall  be  assessed  on  the  mortgaged  premises,  or  to  pay  all 
taxes  which  may  be  assessed  upon  the  interest  of  the  mortgagee, 
such  stipulation  may  not  be  regarded  as  an  election  by  the  mort- 
gagor to  have  both  interests  assessed  together.  It  is  considered 
that  such  stipulations  should  not  be  so  construed.  Whether  the 
effect  of  such  stipulations  would  be  to  take  away  or  nullify  the 
right  which  the  mortgagor  might  otherwise  have  to  pay  the  tax 
on  the  mortgagee’s  interest  and  to  offset  the  amount  paid 
against  the  mortgage  debt,  so  as  to  make  the  separate  assess- 
ment of  the  mortgagee’s  interest  a useless  formality,  is  primar- 
ily a question  between  mortgagor  and  mortgagee  which  can  be 
settled  only  by  the  courts  if  they  cannot  settle  it  between  them- 


selves.  For  an  assessor  to  construe  these  stipulations,  although 
only  for  the  purposes  of  his  own  work,  would  be  an  interference 
on  his  part  with  the  private  rights  of  the  parties,  of  which  the 
law  has  not  made  him  the  judge.  Where  a mortgage  contains 
an  express  stipulation  that  both  interests  shall  be  assessed  to- 
gether, such  stipulation  may  be  taken  as  an  exercise  of  the  right 
of  option  given  to  the  mortgagor  in  section  three.  But  if  the 
mortgagor,  notwithstanding  such  stipulation,  should  require 
separate  assessment,  the  assessor  should  comply  with  such  re- 
quirement. This  would  be  safer  practice  at  least.  No  one 
could  be  injuriously  affected  by  such  course,  and  there  might 
be  instances  where  the  parties  have  so  changed  their  stipula- 
tions that  the  mortgagor  would  be  entitled  to  the  separate  as- 
sessment. 

The  conclusion  upon  this  branch  of  the  discussion  is  that  the 
interest  of  the  mortgagee  should  be  assessed  separately  in  all 
cases  unless  the  mortgagor  should  request  or  consent  to  the  as- 
sessment of  both  interests  together. 

MORTGAGES  PREVIOUSLY  EXECUTED. 

Thus  far,  in  this  circular,  no  distinction  has  been  made  be- 
tween mortgages  executed  before  the  new  law  went  into  effect 
(May  23,  1903)  and  those  that  have  been  executed  since  that 
date.  The  law  itself  makes  no  such  distinction,  at  least  not  in 
the  wording  of  its  provisions,  but  in  form  is  applicable  to  prior 
mortgages  as  well  as  those  subsequently  executed.  The  act 
should  therefore  be  construed  as  applying  to  both  classes  of 
mortgages  so  far  at  least  as  effect  can  be  given  to  its  various 
provisions  without  bringing  them  into  conflict  with  constitu- 
tional restrictions.  It  is  not  perceived  that  such  application 
would  bring  any  of  the  provisions  of  the  act  into  such  conflict, 
except  the  provision  in  section  5,  which  authorizes  the  mort- 
gagor after  paying  the  tax  on  the  interest  of  the  mortgagee  to 
offset  the  amount  so  paid  against  the  mortgage  debt.  Presum- 
ably there  are  cases — there  may  be  many — of  mortgages  exe- 
cuted before  chapter  378  took  effect  in  which  the  mortgagor  is 


— 13  — 


under  valid  agreement  to  pay  whatever  tax  may  be  imposed 
upon  the  mortgage  as  an  interest  in  the  lands  or  otherwise.  To 
construe  the  above  mentioned  provision  in  section  5 as  ap- 
plicable to  such  cases  so  as  to  release  the  mortgagor  from  such 
agreement  would  bring  such  provision  into  direct  conflict  with 
the  constitutional  restriction  forbidding  the  enactment  of  any 
law  impairing  the  obligation  of  contracts.  But  it  does  not  fol- 
low from  this  that  the  entire  act  is  unconstitutional  or  even  that 
the  provision  in  section  5 is  void  and  of  no  effect.  By  familiar 
and  well  settled  rules  of  construction  the  statute  must  be  so  in- 
terpreted as  to  give  effect  to  all  its  provisions  so  far  as  may  be 
done  without  doing  violence  to  the  language  employed  and  with- 
out bringing  it  into  conflict  with  constitutional  restrictions. 
The  provision  in  section  5 giving  the  right  of  offset  mentioned 
is  quite  independent  of  the  other  provisions  of  the  statute. 
Such  other  provisions  may  therefore  be  given  full  effect  and 
held  to  apply  to  mortgages  executed  before  the  enactment  of 
chapter  378  as  well  as  to  mortgages  thereafter  executed,  with- 
out reference  to  the  construction  to  be  placed  on  the  provision 
in  section  5,  and  the  conclusion  reached  is  that  those  provisions 
should  be  construed  as  applying  and  do  apply  to  both  classes 
of  mortgages.  As  already  observed,  the  provision  in  section  5 
cannot  be  held  applicable  in  those  cases  where  the  mortgagor  is 
under  valid  obligation  to  pay  the  tax  imposed  upon  the  interest 
of  the  mortgagee.  But  this  does  not  prevent  its  application  to 
all  cases  where  the  mortgagor  is  not  under  such  obligation,  and 
the  conclusion  is  reached  that  the  provision  does  apply  to  such 
last  mentioned  cases.  In  other  words,  it  is  to  be  presumed  that 
the  legislature  did  not  intend  that  the  provision  in  section  5 
should  apply  in  cases  where  the  mortgagor  is  under  obligation 
to  pay  the  tax  on  the  interest  of  the  mortgagee;  but  that  it 
should  apply,  in  respect  to  mortgages  theretofore  executed,  only 
in  cases  where  such  obligation  does  not  exist — cases  where  the 
exercise  of  the  right  of  offset  would  not  be  in  violation  of  the 
obligation  of  the  mortgagor’s  contract — and  as  to  mortgages 
thereafter  executed,  only  where  such  right  of  offset  has  not 
been  relinquished  by  agreement  to  pay  the  tax  or  otherwisa 


-14  — 


The  question  has  been  asked  whether  chapter  378  is  not  Un- 
constitutional and  void  by  reason  of  the  seeming  conflict  be- 
tween the  provision  in  section  5 and  the  constitutional  proh- 
ibition of  laws  impairing  the  obligation  of  contracts.  If  the 
above  stated  conclusions  are  correct,  the  answer  to  this  question 
must  be,  of  course,  that  the  statute  is  not  void  on  the  grounds 
stated. 


COVENANTS  TO  PAY  THE  TAX. 

The  opinion  has  already  been  expressed,  that  the  mortgagor’s 
right  of  offset  provided  in  section  5 is  not  available  to  him  in 
case  he  is  under  obligation  to  his  mortgagee  to  pay  the  tax  upon 
the  mortgagee’s  interest.  It  is  quite  another  question  to  deter- 
mine what  shall  constitute  such  obligation  or  whether  under  the 
wording  of  a particular  covenant  or  stipulation  on  the  part  of 
the  mortgagor  such  obligation  has  or  has  not  been  incurred. 
This  would  be  purely  a question  of  the  construction  or  meaning 
of  the  contract  between  mortgagor  and  mortgagee,  to  be  deter- 
mined in  each  case  upon  the  wording  of  the  contract,  and  per- 
haps in  some  instances  requiring  a knowledge  of  the  attending 
facts  and  circumstances.  It  is  primarily  a question  affecting 
the  private  rights  of  the  parties.  As  such,  it  is  not  within  the 
province  of  this  commission  to  consider  and  one  which  the 
courts  only  have  authority  to  settle  if  the  parties  themselves  do 
not  agree.  But  notwithstanding  this,  the  commission  has  been 
asked  to  express  an  opinion  in  numerous  instances,  and  in  a 
sense  it  has  become  a topic  of  public  interest.  In  view  of  this 
and  for  the  reason  also  that  it  is  a matter  indirectly  affecting 
assessing  officers  in  the  performance  of  their  duties,  some  ex- 
pression of  opinion  on  the  subject  is  perhaps  justifiable.  The 
discussion  will  be  confined  to  such  cases  as  usually  or  frequently 
occur. 

Ho  doubt  is  entertained  that  where  the  mortgagor  has  cove- 
nanted or  agreed  in  clear  and  unmistakable  terms  to  pay  all 
taxes  which  may  . be  imposed  upon  the  mortgage,  or  all  taxes 
which  may  be  imposed  upon  the  mortgagee  on  account  of  such 
mortgage,  such  covenant  should  be  construed,  as  requiring  the 


— 15  — 


mortgagor  to  pay  any  tax  imposed  under  the  provisions  of  chap- 
ter 378  upon  the  interest  of  the  mortgagee  in  the  mortgaged 
real  estate. 

Real  estate  mortgages  as  usually  drawn  contain  a clause  or 
stipulation  requiring  simply  that  the  mortgagor  shall  pay  all 
taxes  which  may  be  assessed  on  the  mortgaged  real  estate;  and 
when  drawn  in  the  short  form  prescribed  by  Wisconsin  statutes 
they  are  to  be  construed  the  same  as  if  such  stipulation  were 
expressly  included.  (Sec.  2209,  Stat.  1898.)  Questions  sub- 
mitted usually  relate  to  mortgages  containing  such  stipulations 
and,  substantially,  nothing  more ; and  as  to  these  some  doubt  is 
frequently  indicated.  The  real  question  is  whether  the  tax 
which  the  new  law  imposes  upon  the  interest  of  the  mortgagee 
is  to  be  considered  a tax  upon  the  mortgaged  premises  xuithin 
the  meaning  of  the  usual  stipulation  referred  to  above.  The 
law  expressly  declares  the  interest  of  the  mortgagee  to  be  an 
interest  in  the  mortgaged  real  estate  and  the  tax  upon  such  in- 
terest to  be  a lien  upon  the  entire  property.  In  the  enforce- 
ment of  the  tax  upon  either  interest  by  sale  of  the  land,  the  two 
interests  are  inseparable.  (Sec.  5.)  The  tax  upon  the  mort- 
gagor’s interest  and  the  tax  upon  the  interest  of  the  mortgagee 
are  for  the  same  purposes.  They  are  respectively  nothing  more 
or  less  than  separate  parts  of  the  same  tax  on  the  same  real  es- 
tate. Together  they  represent  precisely  what  would  be  charged 
against  the  same  real  estate  if  not  subject  to  mortgage.  The 
conclusion  seems  unavoidable  that  the  tax  upon  one  interest  is 
as  much  a tax  upon  land  as  the  tax  upon  the  other  interest  It 
follows  of  course  that  when  the  stipulation  of  the  mortgagor 
requires  him  to  pay  all  taxes  assessed  upon  the  mortgaged  prem- 
ises it  must  be  construed  as  requiring  him  to  pay  that  part  of 
the  tax  charged  upon  the  mort.^^ee’s  interest  as  well  as  that 
part  charged  upon  his  own.  In  other  words,  he  is  under  obli- 
gation to  pay  the  tax  upon  the  interest  of  the  mortgagee  and  is 
thereby  precluded  from  exercising  the  right  to  offset  the  amount 
of  the  tax  paid  against  the  mortgage  debt. 

The  views  expressed  above,  as  to  the  construction  to  be  placed 
upon  the  provision  in  section  5 giving  such  right  of  offset,  and 


— 16  — 


also  in  respect  to  the  construction  to  be  placed  upon  the  usual 
tax  covenants  in  mortgages,  are  in  accordance  with  the  deci- 
sions of  the  Supreme  Court  of  Massachusetts.  In  the  case  of 
Hammond  vs.  Lovell,  reported  in  Vol.  136,  Mass.  Reports,  184, 
a mortgager  had  covenanted  to  pay  “all  taxes  and  assessments 
on  the  granted  [mortgaged]  premises.’’  After  the  execution 
of  such  mortgage  the  Massachusetts  legislature  passed  a mort- 
gage tax  law,  substantially  the  same  as  the  Wisconsin  act  in  its 
principal  features.  The  mortgagor  paid  the  mortgage  debt,  but 
did  not  pay  the  taxes  charged  upon  the  interest  of  the  mort- 
gagee,  and  then  sought  to  compel  the  mortgagee  to  pay  such 
taxes  and  discharge  the  mortgage.  The  court  ruled  that  the  tax 
upon  the  mortgagee’s  interest  was  a tax  upon  the  mortgaged 
premises^  which  by  the  terms  of  the  mortgagor’s  covenant,  he 
was  under  obligation  to  pay;  that  the  statute  on  which  the 
mortgagor  based  his  claim,  though  in  form  applicable  to  all 
cases,  was  not  intended  to  apply  to  cases  where  the  mortgagor 
had  placed  himself  under  such  obligation,  and  therefore  the 
mortgagee  could  not  be  compelled  to  pay  the  tax.  Chief  Justice 
Morton,  writing  the  opinion,  says  in  part : 

“One  of  the  conditions  of  the  mortgages,  given  in  1874  by 
the  plaintiff  to  the  defendant,  is  that  the  mortgagor  ‘shall  pay 
all  taxes  and  assessments  on  the  granted  premises.’  The  prin- 
cipal question  in  this  case  is  whether,  under  this  stipulation, 
the  plaintiff  is  bound  to  pay  the  taxes  assessed  for  the  year  1882 
upon  the  amount  of  the  interest  as  [of  the]  mortgagee. 

“A  material  change  in  the  mode  of  taxing  mortgaged  real 
estate  was  made  by  the  Stat.  of  1881,  c.  304,  re-enacted  in  the 
Pub.  Sts.,  c.  11,  Sec.  13  et  seq.  Under  these  statutes,  mort- 
gagors and  mortgagees  are,  for  the  purposes  of  taxatAn,  to  be 
doomed  to  be  joint  owners,  until  the  mortgagee  takes  possession, 
and  the  assessors  are  required  to  assess  upon  the  land  the 
amount  of  the  mortgagee’s  interest  and  also  the  amount  of  the 
mortgagee’s  interest  after  deducting  the  assessed  value  of  such 
mortgagee’s  interest;  and  all  taxes  thus  assessed  constitute  a 
lien  up'on  the  land  for  two  years  after  they  are  committed*  to  the 
collector,  and  may  be  enforced  by  sale  of  the  land.  Pub.  Sts., 
c,  12,  Sec,  24.  Loans  on  mortgage  of  real  estate,  thus  taxable 
as  real  estate,  are  not  to  be  included  for  purposes  of  taxation 


in  debts  due  to  the  person  to  be  taxed.  St.  1881,  c.  304,  Sc2. 
6.  Pub.  Sts.,  c.  11,  Sec.  4. 

“Before  the  St.  of  1881,  mortgagors  in  possession  were  li- 
able to  be  assessed  for  the  full  value  of  the  real  estate,  and  mort- 
gagees were  liable  to  be  assessed  for  the  amount  of  the  loans 
upon  mortgage,  as  debts  due  to  them;  and  the  object  of  the  stat- 
ute was,  as  its  title  imports,  to  relieve  property  from  the  liabil- 
ity of  double  taxation.  But  although,  under  these  statutes,  a 
mortgagee  may  in  some  cases  be  relieved  from  taxation  upon  his 
loan,  as  a debt  due  to  him  . . . still  the.  tax  is  a tax  upon 

the  land.  If  a mortgagor,  since  the  passage  of  the  statute, 
chooses  to  stipulate,  as  one  of  the  conditions  of  his  mortgage, 
that  he  will  pay  all  taxes  upon  the  land,  it  would  include  taxes 
levied  upon  the  land  under  these  statutes. 

“The  legislature  did  not  intend  to  interfere  with  or  control 
the  relations  existing  by  contract  between  mortgagors  and  mort- 
gagees. The  plaintiff  is  bound  by  his  contract,  as  between  him 
and  the  mortgagee,  to  pay  all  taxes  assessed  upon  the  premises. 
This  stipulation  was  designed  to  protect  the  security  in  the 
mortgagee’s  hands  so  that  it  should  not  be  lessened  by  a lien 
•for  taxes,  and  the  plaintiff  is  not  excused  from  his  obligation 
by  the  new  statutes  changing  the  form  of  levying  taxes  upon 
the  land  so  as  to  prevent  double  taxation  in  certain  cases.” 

To  substantially  the  same  effect  in  respect  to  the  application 
of  the  statute,  are  the  decisions  of  the  same  court  in  Co  dm  an 
vs.  Johnson,  104  Mass.,  491,  and  Walker  vs.  Whittemore,  112 
Mass.,  187.  These  cases  arose  under  leases  in  which  the  lessee 
had  covenanted  to  pay  all  taxes  imposed  unon  the  premises 
during  the  term  of  the  lease.  Statutes  passed  subsequent  to 
the  execution  of  such  leases  provided  regulations  between  land- 
lord and  tenant  in  respect  to  such  taxes  more  favorable  to  the 
tenant  than  the  terms  of  the  covenant  in  the  leases  under  con- 
sideration. In  each  case  the  tenant  claimed  the  more  favor- 
able provisions  of  the  statute,  which  in  form,  was  applicable  to 
all  cases.  The  court  held  that  inasmuch  as  it  was  beyond  the 
power  of  the  legislature  to  relieve  lessees  from  the  obligations 
of  their  contracts  previously  entered  into,  the  statute  must  be 
construed  as  not  being  intended  to  apply  to  such  cases.  • The 
2 


— 18  — 


reasoning  of  the  court  is  stated  in  the  opinion  in  Walker  vs. 
Whittemore,  as  follows: 

“But  it  is  not  to  be  supposed  that  the  legislature  intended  to 
release  or  modify  any  express  covenant  made  by  the  tenant  in 
the  lease  itself.  If  the  tenant  has  covenanted  to  pay  all  taxes, 
ordinary  and  extraordinary  alike,  it  is  not  in  the  power  of  the 
legislature  to  alter  his  contract  and  substitute  another,  less  bur- 
densome to  the  lessee,  in  its  place,  without  the  consent  of  the 
lessor.  We  must  therefore  consider  the  statute  as  establishing 
the  rule  only  for  cases  in  which  the  parties  have  not  otherwise 
provided  by  the  terms  of  their  lease.  Whatever  of  hardship 
may  be  in  the  case,  it  arises  entirely  from  the  terms  of  the  writ- 
ten covenants,  and  is  beyond  the  power  of  the  court  to  relieve.” 

Chapter  378  differs  from  the  Massachusetts  mortgage  tax  law 
in  its  administrative  and  other  detail  provisions,  and  differs 
also  somewhat  in  the  wording  of  its  principal  provisions ; but  in 
respect  to  the  chief  objects  sought  to  be  accomplished,  and  the 
methods  of  accomplishment,  the  two  statutes  are  practically 
identical.  Under  both  statutes,  the  mortgage  is  deemed  to  be 
an  interest  in  the  mortgaged  real  estate';  it  is  to  be  assessed  as 
such  interest  and  not  otherwise,  in  the  district  in  which  such 
real  estate  is  located  and  not  elsewhere ; the  mortgagee’s  interest 
may  (must)  be  separately  assessed,  at  least  if  the  mortgagor  so 
requires;  the  valuation  of  the  mortgagor’s  interest  is  determined 
by  the  assessable  value  of  the  entire  real  estate  after  deducting 
the  assessed  valuation  of  the  interest  of  the  mortgagee ; the  tax 
upon  the  mortgagee’s  interest  is  made  a lien  upon  the  land ; the 
mortgager  may  pay  such  tax  and  is  given  the  right  .(without, 
exception,  in  form)  to  offset  the  amount  paid  against  the  mort- 
gage debt.  These  are  in  substance  the  chief  provisions  of  both 
statutes.  Prior  to  the  enactment  of  chapter  378,  other  states 
had  sought  to  accomplish  the  same  general  results  but  by  quite 
unlike  methods.  It  may  be  fairly  claimed  therefore  that  the 
Wisconsin  act  is  virtually  an  adoption  of  the  Massachusetts 
statute,  in  respect  to  these  principal  provisions.  So  regarded, 
by  a familiar  rule  of  construction,  it  is  to  be  given  the  same 
interpretation  as  that  placed  upon  it  by  the  Massachusetts  court 


prior  to  its  adoption  in  this  state.  But  independently  of  this 
consideration,  the  decisions  of  the  Massachusetts  Supreme 
Court  are  high  authority,  and  in  respect  to  the  questions  under 
consideration  are  accepted  as  correct  expositions  of  the  law. 

It  is  perhaps  unnecessary  to  add  that  the  views  herein  ex- 
pressed are  advisory  merely  and  not  conclusive  upon  any  one. 
The  commission  does  not  assume  to  advise  mortgagors  or  mort- 
gagees in  respect  to  their  private  rights  and  obligations.  Mort- 
gagors are  asked,  however,  to  give  these  questions  careful  con- 
sideration and  to  inform  themselves  as  to  their  rights  under  the 
new  enactment;  and  if  satisfied  in  any  case  that  the  right  of 
offset  is  not  available  they  are  also  asked  to  request  or  consent 
that  the  interests  of  mortgagor  and  mortgagee  be  assesssed  to- 
gether. By  so  doing  they  will  serve  the  interests  of  the  pub- 
lic, as  every  good  citizen  should,  saving  the  inconvenience,  labor 
and  expense  of  separate  assessment  and  taxation ; and  they  will 
also  in  many,  if  not  most  instances  serve  their  private  interests 
as  well.  If  a mortgagor  to  whom  such  right  of  offset  is  not 
available  should  attempt  to  enforce  his  supposed  right  thereto, 
or  should,  as  a preliminary  to  such  attempt,  require  the  sepa- 
rate assessment  of  the  mortgagee’s  interest,  there  is  a possibility 
that  the  mortgagee  might  look  upon  such  action  as  hostile  to 
his  rights  and  be  disposed  to  bring  the  matter  to  a legal  test  by 
foreclosure  or  other  proceedings  involving  trouble  and  expense. 

FAILURE  TO  MAKE  SEPARATE  ASSESSMENT. 

It  is  realized  that  it  is  nearly  i impossible,  especially  in  the 
present  season,  for  the  assessor  to  obtain  the  full  information 
needed  to  enable  him  to  make  the  proper  assessment  of  all  mort- 
gages upon  lands  in  his  district  which  are  required  by  the  stat- 
ute to  be  separately  assessed.  The  question  is  presented 
whether  the  validity  of  the  assessment  will  be  effected  if  the 
assessor  should  fail,  through  want  of  information  or  otherwise, 
to  separately  assess  the  interest  of  the  mortgagee  in  those  cases 
in  which  the  law  directs  such  separate  assessment  to  be  made. 
The  ruling  of  the  courts  upon  such  question  can  not  be  pre- 


— 20  — 


dieted  with  certainty.  It  would  seem  fairly  clear,  however, 
that,  inasmuch  as  the  total  valuation  of  mortgaged  real  estate 
would  be  the  same  when  both  interests  are  assessed  together  as 
it  would  be  if  such  interests  were  separately  assessed,  no  one 
would  be  injuriously  affected  by  the  failure  to  make  such  sepa- 
rate assessment  except  the  mortgagor;  and  it  is  not  perceived 
that  he  would  lose  any  substantial  right  by  the  omission  of  the 
separate  assessment  if  by  the  terms  of  his  mortgage  or  otherwise 
he  is  under  obligation  to  pay  the  tax  on  the  interest  of  the  mort- 
gagee. It  is  presumable  therefore  that  the  courts  would  refuse 
to  consider  the  objection  that  the  interest  of  the  mortgagee  was 
not  separately  assessed  except  when  made  by  a mortgagor  whose 
contract  with  the  mortgagee  is  such  that  he  may  avail  himself 
of  the  right  of  offset  provided  in  the  statute.  And  even  in  such 
case  it  is  possible  that  the  courts  would  refuse  to  set  aside  the 
assessment  or  the  tax  on  the  ground  that  the  amount  of  tax 
justly  chargeable  to  the  mortgagee’s  interest  could  be  fairly  ap- 
portioned or  determined  by  calculation  without  re-assessment 
so  as  to. preserve  the  mortgagor’s  right  of  offset  in  any  action 
that  should  arise  between  mortgagor  and  mortgagee  respecting 
the  same. 

By  way  of  conclusion  on  this  branch  of  the  subject  it  may  be 
said  that  it  is  the  duty  of  assessors,  of  course,  to  observe  the  law 
and  to  make  separate  assessment  of  the  mortgagee’s  interest 
(when  not  authorized  by  the  mortgagor  to  assess  both  interests 
together)  in  all  cases  where  the  assessor  has  information  of  the 
existence  of  the  mortgage  and  of  the  amount  due  thereon  so 
as  to  make  a proper  valuation  of  the  mortgagee’s  interest.  It 
seems  fairly  clear,  however,  that  the  validity  of  the  entire  as- 
sessment will  not  be  affected  by  a failure  to  make  separate  as- 
sessment of  the  interest  of  mortgagees;  and  that  such  failure 
will  not  affect  the  validity  of  the  assessment  of  mortgaged  real 
estate  in  cases  where,  as  between  mortgagee  and  mortgagor,  the 
latter  is  under  obligation  to  pay  the  tax  on  the  mortgagee’s  in- 
terest. But  in  other  cases  the  effect  of  such  failure  is  involved 
in  some  doubt  which  can  be  settled  only  by  the  courts,  and  the 


— • 21  — • 


only  safe  course  in  such  other  cases  is  to  make  separate  assessr 
ment  of  the  mortgagee’s  interest. 

OBTAINING  INFORMATION. 

Something  further  should  he  said,  perhaps,  as  to  the  duty 
of  assessors  and  the  means  to  be  employed  in  obtaining  infor- 
mation for  the  purpose  of  making  separate  assessment  of  such 
mortgages  as  are  required  to  be  assessed  in  that  way.  For  the 
purposes  of  the  assessment  to  be  made  in  1903,  it  may  be  im- 
practicable for  assessors,  with  or  without  the  aid  of  the  county 
supervisor  of  assessment,  to  secure  from  the  records  in  the 
office  of  the  register  of  deeds  information  of  all  the  mortgages 
required  to  be  assessed  by  the  special  method  required  by  chap- 
ter 378.  And  if  such  information  were  obtained,  the  assessor 
would  need  to  look  elsewhere  to  ascertain  the  amount  remain- 
ing unpaid  upon  each  mortgage  to  enable  him  to  place  a proper 
valuation  thereon  for  purposes  of  assessment.  Ordinarily  this 
can  be  learned  only  from  the  parties  to  the  mortgage,  and  usu- 
ally from  the  mortgagor  only,  as  the  mortgagee  often  resides 
in  some  other  district.  From  this  it  may  be  seen  that  the  as- 
sessor must  rely  mainly  on  the  owners  of  mortgaged  property 
for  the  information  needed  to  make  separate  assessment  of  the 
mortgagee’s  interest.  Inasmuch  as  the  assessor  will  be  greatly 
pressed  for  time  to  make  his  assessment,  especially  for  the  pres- 
ent season,  owners  of  mortgaged  property  desiring  separate  as- 
sessment of  the  mortgagee’s  interest  should  bestir  themselves  to 
furnish  the  assessor  the  required  information;  otherwise  there 
is  danger  of  the  matter  being  overlooked  in  many  instances. 

APPORTIONMENT  OF  VALUES. 

Kef  erring  to  subdivision  4 of  section  4 of  said  chapter  378, 
providing  for  the  apportionment  of  the  valuation  of  buildings 
between  mortgagee  and  mortgagor  where  the  two  interests  are 
separately  assessed,  correspondents  have  asked  to  be  shown  by 
a concrete  example  how  such  apportionment  is  to  be  worked  out. 


Let  it  be  assumed  that  the  total  value  of  a piece  of  mort- 
gaged real  estate  is  $15,000  ; that  the  mortgage  is  worth  $10,000 
and  the  value  of  the  improvements  is  $5,000  or  one-third  of  the 
whole.  The  mortgagee’s  total  interest  should  therefore  be  as- 
sessed at  $10,000  and  the  mortgagor’s  total  interest  at  $5,000. 
The  buildings  being  worth  one-third  of  the  whole  property,  in 
assessing  the  mortgagee's  interest,  one-third  of  the  value  fixed 
thereon  (1-3  of  $10,000  or  $3,333.33)  should  be  put  down 
under  “value  of  improvements”  and  the  other  two-thirds  (2-3 
of  $10,000  or  $6,666.67)  should  be  put  down  under  the  head 
“value  exclusive  of  buildings.”  In  assessing  the  mortgagor  s 
interest  one-third  (1-3  of  $5,000,  or  $1,666.67)  should  be  put 
down  under  “value  of  improvements”  and  the  other  two-thirds 
(2-3  of  $5,000,  or  $3,333.33)  should  be  put  down  under  the 
head  “value  exclusive  of  improvements.”  Where  such  appor- 
tionment works  out  in  fractions  of  a dollar  as  in  the  foregoing 
example,  it  would  be  well  to  omit  the  fraction  if  less  than  half 
a dollar  and  to  treat  it  as  a whole  dollar  if  a half  dollar  or  more. 

SOME  CONSTITUTIONAL  QUESTIONS. 

Many  inquiries  have  been  received  submitting  questions  in- 
volving the  validity  of  chapter  378  on  constitutional  grounds. 
Some  of  these  will  be  stated  and  discussed  to  some  extent,  but 
no  attempt  will  be  made  to  pronounce  definite  opinions  thereon. 
In  respect  to  this,  as  to  all  other  assessment  laws,  the  function 
of  the  commission  is  administrative  and  not  judicial  in  any 
proper  sense.  It  is  considered  that  no  administrative  officer 
should  assume  or  pronounce  any  act  of  the  legislature  to  be 
nugatory  unless  it  is  so  clearly  in  violation  of  constitutional 
principles  as  to  leave  no  room  for  doubt  of  its  invalidity.  The 
time  available  for  the  consideration  of  these  questions  has  been 
quite  limited,  and  the  investigation  has  not  been  so  thorough 
as  could  be  desired.  So  far  as  it  has  gone  it  has  not  led  to  any 
clear  conviction  that  the  act  is  unconstitutional.  There  are 
features  in  the  statute  which  give  rise  to  some  questions  and 
doubts  but  for  reasons  already  stated  these  doubts  are  resolved 


in  favor  of  the  constitutionality  of  the  law.  Authority  to  de- 
termine and  settle  such  questions  is  possessed  only  by  the 
courts ; and  until  there  has  been  a final  judicial  decision  against 
the  validity  of  the  act  assessing  officers  should  accept  it  as  a 
valid  enactment., 

The  constitutional  objections  urged  against  the  statute  may 
* be  roughly  reduced  to  two  propositions,  viz. : 

(1)  That  the  act  provides  a rule  for  the  taxation  of  a partic- 
ular class  of  credits  wholly  different  from  the  rules  provided 
for  the  taxation  of  other  credits,  resulting  in  the  virtual  exemp- 
tion of  mortgage  credits  subject  to  the  special  method  of  assess- 
ment provided  by  the  new  act  and  leaving  other  classes  of  cred- 
its subject  to  full  taxation;  that  the  classification  of  credits  for 
such  purpose  is  wholly  arbitrary  and  in  violation  of  the  provi- 
sion in  section  I of  article  VIII  of  the  state  constitution,  that 
“the  rule  of  taxation  shall  be  uniform,”  and  perhaps  also  in 
violation  of  the  provisions  in  the  federal  constitution  which 
guarantee  to  every  citizen  the  equal  protection  of  the  laws. 

(2)  That  the  act,  in  effect  at  least,  grants  to  a certain  class 
of  debtors  exemptions  on  account  of  debts  owing  not  enjoyed 
by  other  classes  of  debtors,  and  that  the  classification  for  such 
purpose  is  also  arbitrary  and  in  violation  of  the  constitutional 
provisions  above  mentioned. 

As  to  the  first  proposition,  very  little  discussion  seems  neces- 
sary. The  act  is  not  considered  as  an  act  for  the  exemption  of 
the  class  of  credits  coming  under  its  provisions,  in  any  true  or 
legal  sense.  It  provides  for  the  assessment  of  all  such  credits 
in  every  instance,  but  only  by  a different  mode.  Under  such 
act  such  credits  are  invariably  assessed,  as  an  interest  in  the 
mortgaged  real  estate.  Uo  omission  from  assessment  is  per- 
mitted by  the  statute,  and  no  omission  can  occur  except  by 
omission  of  the  land  itself.  That  the  legislature  may  provide 
for  the  assessment  of  a certain  class  of  credits,  by  a different 
method  from  that  provided  for  the  assessment  of  other  credits, 
it  is  not  doubted,  notwithstanding  the  fact  that  such  different 
method  changes  the  place  of  assessment  from  the  district  in 


which  the  creditor  resides  to  the  district  in  which  the  mortgaged 
real  estate  is  located.  State  vs.  Runyon,  41  N.  J.  Law,  08, 
cited  with  approval  in  Wis.  Cent.  Ry.  Co.  vs.  Taylor  Co.,  52 
Wis.,  37,  84.  So  far  as  the  statute  provides  any  exemption 
it  is  an  exemption,  in  form  at  least,  in  favor  of  the  mortgage 
debtor  on  account  of  the  mortgage  debt  by  him  owing,  accom- 
plished by  reduction  in  the  assessment  of  his  interest  in  the 
mortgaged  real  estate.  Such  exemption  and  any  inequalities 
resulting  therefrom  come  under  the  second  proposition  above 
stated  and  will  be  discussed  therewith.  It  may  be  said  perhaps 
that  the  same  results  would  be  accomplished  by  direct  exemp- 
tion of  the  credits  subject  to  the  special  method  of  assessment 
provided  by  chapter  378.  This  assertion  does  not  seem  to  re- 
quire discussion,  and  it  is  dismissed  with  the  remark  that  the 
same  statement  would  apply  as  truly  in  respect  to  any  statute 
granting  an  exemption  in  favor  of  debtors  on  account  of  debts 
owing. 

The  second  proposition  would  seem  to  require  more  extended 
consideration.  Under  the  construction  placed  upon  the  above 
mentioned  constitutional  provisions  by  the  supreme  court  of  this 
state,  the  legislature  is  not  prohibited  from  making  classifica- 
tions of  persons  or  subjects  of  taxation  and  providing  exemp- 
tions or  methods  or  rates  of  taxation  for  one  class  different  from 
those  provided  for  other  classes,  but  the  classifications  for  such 
purposes  must  “be  founded  upon  real  differences  affording  ra- 
tional grounds  for  distinction and  the  treatment  of  each  in- 
dividual or  subject  of  taxation  in  any  one  class  must  be  the 
same  as  the  treatment  of  all  others  in  the  same  class;  in  other 
words,  there  must  be  uniformity  of  rule  and  equality  for  all 
coming  within  the  same  class.  Wis.  Cent.  Ry.  Co.  vs.  Taylor 
Co.,  52  Wis.,  37 ; Black  vs.  The  State,  113  Wis.,  205. 

SAME  SUBJECT CLASSIFICATION  OF  CREDITS. 

Considered  with  reference  to  the  rules  now  prescribed  by  law 
for  the  assessment  and  taxation  (or  exemption)  of  credits,  the 
following  classifications  appear  to  be  established: 


— 25  — 


Class  A. 

(1)  Credits  taxable  under  former  laws  wbich  are  secured 
by  mortgage  on  Wisconsin  real  estate  subject  to  taxation  under 
the  general  assessment  and  tax  laws  of  the  state. 

(2)  Credits  held  by  non-residents  (not  taxable  under 
former  laws)  secured  in  the  same  manner. 

Class  B. 

(1)  Credits  taxable  under  former  laws,  secured  by  mort- 
gage on  real  estate  in  other  states. 

(2)  Credits  taxable  under  former  laws  secured  by  mort- 
gage  on  real  estate  not  subject  to  taxation  under  general  assess- 
ment laws. 

(3)  Credits  taxable  under  former  laws  not  secured  by  real 
estate  mortgage. 

Class  C. 

(1)  Credits  not  taxable  under  former  laws,  secured  by 
mortgage  of  real  estate  within  or  without  the  state,  taxable  and 
non-taxabla 

(2)  Credits  not  taxable  under  former  laws,  not  secured  by 
mortgage  of  real  estate. 

SAME  SUBJECT 'TREATMENT  OF  THE  DIFFERENT  CLASSES. 

. .Class  A. — The  credits  included  in  this  class  are  those  which 
are  subject  to  the  special  method  of  assessment  prescribed  by 
chapter  378.  Each  such  credit  and  the  mortgage  by  which  it  is 
secured  is  assessed  and  taxed  as  an  interest  in  the  mortgaged 
real  estate,  as  the  property  of  the  creditor,  in  the  district  in 
which  such  real  estate  is  located,  and  not  elsewhere  nor  other- 
wise. The  creditor  is  not  entitled  to  any  reduction  in  such  as- 
sessment on  account  of  debts  by  him  owning.  (Sec.  7.)  The 
debtor’s  interest  in  the  same  real  estate  is  assessed  for  only  such 
amount  as  shall  remain  after  deducting  the  assessed  valuation 


— 26  — 


of  the  mortgagee’s  interest  from  the  assessable  value  of  the 
whole  property ; but  the  mortgagor  is  not  entitled  to  reckon  the 
mortgage  debt  as  among  his  debts  owing  for  the  purpose  of  re- 
ducing his  assessment  for  credits  held  by  him.  (Sec.  7.)  Un- 
der laws  as  existing  prior  to  the  enactment  of  chapter  378,  all 
credits  included  in  Class  A,  except  those  held  by  non-residents, 
were  subject  to  the  same  method  of  assessment  now  prescribed 
for  credits  included  in  Class  B. 

Class  B. — The  credits  embraced  within  this  class  include  all 
credits  subject  to  taxation  under  former  laws  except  those  now 
included  in  Class  A.  All  such  credits  are  assessed  as  personal 
property  in  the  district  in  which  the  creditor  resides.  As  to  all 
such  credits,  the  creditor  is  entitled  to  an  exemption  or  deduc- 
tion in  the  assessment  thereof  equal  to  the  amount  of  bona  fide 
unconditional  debts  by  him  owing,  provided  the  latter  do  not 
fall  within  Class  A}  and  the  debtor  is  entitled  to  the  like  exemp- 
tion if  he  is  the  holder  of  other  credits  coming  under  Class  B. 
The  law  in  respect  to  the  taxation  of  credits  included  in  Class  B 
is  the  same  as  it  was  before  the  enactment  of  chapter  378,  ex- 
cept that  the  exemption  of  credits  on  account  of  debts  owing 
was  simply  “so  much  of  the  debts  due  or  to  become  due  to  any 
person  as  shall  equal  the  amount  of  bona  fide  and  unconditional 
debts  by  him  owing.” 

Class  C. — As  to  all  credits  included  in  this  class,  they  are 
simply  exempt  or  not  subject  to  taxation.  All  these  exemptions 
were  secured  under  laws  enacted  prior  to  chapter  378,  and  were 
not  affected  by  that  act.  (Sec.  8.) 

From  the  foregoing  it  may  be  observed  that  the  rule  or 
method  for  the  taxation,  or  exemption,  of  each  class  of  credits 
is  the  same  for  all  coming  within  the  same  class.  The  only 
question  for  discussion  would  therefore  seem  to  be  whether  such 
classifications  are  “founded  upon  real  differences  affording 
rational  grounds  for  a distinction.”  The  rule  or  test  just 
quoted,  while  simple  in  statement  and  reasonable  in  theory,  is 
not  one  easy  of  application.  In  a given  case  there  may  be 
room  for  diverse  opinions  as  to  whether  the  “differences”  are 


— 27  — 


or  are  not  “real”  or  whether  they  do  or  do  not  afford  “rational 
grounds  for  a distinction.” 

SAME  SUBJECT REASONS  FOR  THE  CLASSIFICATION. 

As  already  indicated,  Class  A was  created  by  chapter  378. 
The  special  method  for  the  assessment  of  credits  included  in 
that  class  was  prescribed  by  the  same  act.  Under  former  laws 
mortgage  credits  were  subject  to  assessment  as  the  personal 
property  of  the  creditor  at  their  full  value  and  the  mortgaged 
real  estate  was  also  subject  to  assessment  at  its  full  value  with- 
out reduction  on  account  of  the  mortgage  debt.  This  method 
of  assessment  was  considered  by  many  to  be  double  taxation  in 
substance  and  effect  and  to  be  a great  injustice.  Presumably 
it  was  so  considered  by  the  legislature.  It  is  evident  at  least 
that  the  purpose  of  the  legislature  in  enacting  chapter  378  was 
to  do  away  with  this  injustice,  if  such  it  may  be  called,  so  far 
as  practicable.  It  is  true  that  the  rule  inflicting  such  alleged 
injustice  was  not  imposed  upon  mortgage  credits  alone.  All 
taxable  credits  were  legally  subject  to  the  same  rule.  But  in 
practical  working,  mortgage  credits  were  the  only  credits  which 
had  been  assessed  to  any  considerable  extent.  They  were  the 
only  class  of  credits  easily  discovered  or  made  known  to  asess 
ors.  As  a consequence  the  alleged  excessive  burden  resulting 
from  this  rule  of  taxation  was  imposed  rarely  except  in  the  case 
of  credits  secured  by  real  estate  mortgage.  It  was  the  parties 
to  such  credits  more  than  any  others  who  felt  the  burden  and 
who  complained  of  it  as  an.  injustice.  It  is  not  doubted  that 
these  facts  were  potent  as  inducements  to  the  legislature  to  con- 
sider and  devise  a remedy  applicable  to  this  class  of  credits 
alone — in  other  words,  to  put  them  in  a class  by  themselves. 

It  was  impracticable  for  the  legislature  to  extend  the  remedy 
provided  by  chapter  378  to  all  classes  of  credits  or  to  the  mort- 
gage credits  included  in  Classes  B and  C — at  least  there  seems 
to  be  good  grounds  for  such  conclusion.  Referring  to  Class  B, 
it  would  be  impossible  to  app-ly  the  special  method  of  assessment 
prescribed  by  chapter  378  to  credits  “secured  by  mortgage  on 


— 28  — 


real  estate  in  other  states;”  nor  would  it  be  possible  to  apply 
such  special  method  to  credits  “secured  by  mortgage  of  real  es- 
tate not  subject  to  taxation  under  general  assessment  laws” 
without  virtual  or  express  repeal  of  all  the  various  provisions  of 
law  by  which  such  real  estate  was  exempted  or  otherwise  ex- 
cepted from  the  operation  of  the  general  assessment  laws. 

To  extend  the  provisions  of  chapter  378  to  the  credits  in 
Class  C would  operate  to  destroy  the  exemption  of  those  credits 
and  necessitate  the  revision  and  reconstruction  of  all  the  laws 
for  the  taxation  of  banks,  trust,  insurance  and  many  other  com- 
panies taxed  by  license  fee  or  other  special  method,  for  the 
reason  that  such  exemptions  are  chiefly  created  by  or  result 
from  the  laws  providing  such  special  methods  of  taxation  and 
are  a necessary  feature  or  resultant  of  such  laws. 

There  remains  for  consideration  under  this  branch  of  the  dis- 
cussion the  credits  mentioned  in  the  third  subdivision  of  Class 
B — “credits  taxable  under  former  laws  no\t  secured  by  real  es- 
tate mortgage.”  All  kinds  of  taxable  personal  credits  are  in- 
cluded under  this  head.  The  impracticability  of  applying  the 
special  method  of  assessment  prescribed  by  chapter  378  to  such 
credits  is  apparent.  There  is  grave  doubt  of  the  power  of  the 
legislature  to  declare  or  make  such  credits  an  interest  in  the 
debtor’s  property.  But  if  such  power  existed,  what  part,  of  the 
debtor’s  property  would  be  so  affected  and  what  not?  What 
would  be  done  if  the  debtor  had  no  taxable  property,  as  in  the 
case  of  a salaried  person  or  one  pursuing  a professional  calling, 
whose  obligation  would  be  good  without  property  behind  it? 
What  if  the  debtor’s  property  should  be  without  the  state? 
These  and  many  other  questions  will  demonstrate,  or  at  least 
will  sufficiently  indicate,  the  utter  impossibility  of  extending 
the  special  method  of  assessment  prescribed  by  chapter  378  to 
credits  not  secured  by  real  estate  mortgage. 

From  the  foregoing  it  is  seen  that  there  was,  in  legislative 
contemplation  at  least,  urgent  need  for  a measure  doing  away 
with  the  evil  complained  of;  the  measure  adopted  was  practi- 
cable and  efficient  to  that  end  as  to  the  class  of  credits  to  which 


— 29  — 


it  was  made  applicable ; it  could  not  be  made  applicable  to  other 
mortgage  credits  without  upsetting  various  other  provisions  of 
law  which  sound  public  policy  required  to  be  continued  in 
force;  it  could  not  to  be  made  practicable  or  efficient  in  respect 
to  credits  not  secured  by  real  estate  mortgage.  These  consid- 
erations would  seem  to  furnish  reasonable  support  at  least  for 
the  contention  that  the  classifications  mentioned  are  “founded 
upon  real  differences  affording  rational  grounds  for  distinc- 
tion.” 

The  foregoing  is  not  put  forth  as  a full  presentation  or  dis- 
cussion of  constitutional  objections  to  chapter  378,  nor  is  it 
claimed  to  be  a conclusive  answer  to  such  objections  as  have 
been  stated.  The  purpose  has  been,  primarily,  to  show  that  the 
statute  is  not  so  clearly  invalid  as  to  warrant  assessing  officers 
in  disregarding  it  as  nugatory,  and  incidentally  to  render  some 
aid  to  those  who  have  occasion  to  study  the  questions  involved 
before  they  can  be  settled  by  the  courts. 

Nothing  contained  in  this  circular  should  be  taken  or  con- 
strued as  indicating  the  opinion  held  by  any  member  of  this 
commission  in  respect  to  the  wisdom  or  desirability  of  chapter 
378.  There  is  perhaps  an  occasional  remark,  made  incidentally 
in  the  course  of  the  discussion  of  constitutional  or  other  ques- 
tions considered,  which  upon  hasty  reading  may  seem  to  serve 
as  an  expression  of  opinion  on  questions  of  mere  legislative  pol- 
icy. It  is  believed,  however,  that  a careful  reading  will  remove 
any  such  impression.  As  once  before  stated  the  discussion  of 
such  questions  has  no  proper  place  in  this  circular,  and  there 
has  been  no  intention  to  discuss  them  or  to  express  any  opinion 
thereon. 

N.  S.  Gilson, 

Geo.  Curtis,  Jr., 

Nils  P.  Haugen, 
Commissioners  of  Taxation . 


— 30 


APPENDIX. 


No.  662,  A.] 


[Published  May  23,  1903. 


CHAPTER  378. 

AN  ACT  relating  to  the  taxation  of  mortgages  and  mortgaged  real 

estate. 

The  people  of  the  State  of  Wisconsin,  represented  in  senate  and  assem- 
bly, do  enact  as  follows: 

Section  1.  For  the  purposes  of  this  act  the  term  ‘ mortgage”  shall 
be  construed  to  include  every  mortgage  or  other  conveyance  of  real 
estate  and  every  lien  thereon  created  by  contract,  given  or  intended  as 
security  for  the  payment  of  money,  and  shall  also  include  the  indebt- 
edness secured  to  be  paid  by  such  mortgage  or  other  conveyance  or  lien. 
The  term  “mortgagee”  shall  be  construed  to  include  the  holder  of  any 
such  security,  and  the  term  “mortgagor”  shall  be  construed  to  include 
the  owner  of  the  real  estate  subject  to  such  security  or  the  person  en- 
titled to  redeem  therefrom. 

Section  2.  Whenever  taxable  real  estate  shall  be  subject  to  mort- 
gage .such  mortgage  for  the  purposes  of  taxation  shall  be  deemed  an  in- 
terest in  such  real  estate  and  shall  be  assessed  and  taxed  as  such 
interest  in  the  assessment  district  in  which  such  real  estate  is  located, 
and  not  otherwise  and  may  be  separately  assessed  and  taxed  as  herein- 
after provided.  When  so  separately  assessed  the  interest  of  the  mort- 
gagor in  such  real  estate  shall  be  assessed  for  only  such  value  or 
amount  as  shall  remain  after  deducting  the  assessed  value  of  the  in- 
terest of  the  mortgagee  from  the  assessed  value  of  the  entire  real 
estate. 

Section  3.  At  the  option  of  the  mortgagor  both  such  interests  may 
be  assessed  and  taxed  together,  without  separate  valuation,  to  the  mort- 
gagor or  occupant  the  same  as  unincumbered  real  estate.  In  such  case 
the  combined  valuation  of  both  interests  shall  not  exceed  the  just  valu- 
ation which  should  be  placed  upon  such  real  estate  if  unincumbered. 

Section  4.  In  case  the  interest  of  the  mortgagee  shall  be  separately 
assessed,  the  following  rules  shall  be  observed: 

1.  The  valuation  of  the  interest  of  the  mortgagee  shall  be  according 
to  the  true  value  thereof  upon  the  same  basis  that  other  taxable  prop- 
erty is  valued  in  the  same  district,  and  such  valuation  shall  not  ex- 


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ceed  the  just  valuation  which  should  be  placed  upon  the  mortgaged  real 
estate  if  unincumbered. 

2.  If  more  than  one  mortgage  interest  in  the  same  real  estate  shall 
be  required  to  be  separately  assessed  and  it  shall  be  found  necessary 
to  reduce  the  valuation  of  such  interests  in  order  not  to  exceed  the  just 
value  of  the  mortgaged  real  estate,  such  reduction  shall  be  made  upon 
such  interests  in  the  inverse  order  of  their  priority. 

3.  If  several  parcels  of  real  estate  requiring  separate  valuation  shall 
be  subject  to  one  mortgage,  the  interest  of  the  mortgagee  shall  be  ap- 
portioned among  such  several  parcels  according  to  the  just  valuation  of 
such  parcels.  In  case  such  parcels  shall  be  situated  in  more  than  one 
assessment  district  the  amount  of  the  interest  of  the  mortgagee  to  be 
assessed  in  each  district  shall  be  in  proportion  to  the  value  of  such  real 
estate  in  such  district,  which  proportions  shall  be  determined  by  the 
assessors  of  such  districts,  or  a majority  of  such  assessors  at  a meeting 
which  may  be  called  for  that  purpose  by  one  or  more  of  them  by  notice 
in  writing,  specifying  a time  and  place  for  such  meeting  in  one  of  such 
districts,  to  be  served  personally  or  by  leaving  the  same  at  the  resi- 
dence of  the  assessor  to  be  served,  in  time  to  enable  the  person  served 
to  be  present. 

4.  Where  the  valuation  of  buildings  as  improvements  is  required  to 
be  separately  noted  upon  the  assessment  roll  as  provided  by  chapter  92 
of  the  laws  of  1901,  the  value  of  such  improvements  shall  be  appor- 
tioned between  the  valuation  of  the  interest  of  the  mortgagor  and  .the 
valuation  of  the  interest  of  the  mortgagee  in  proportion  to  the  valua- 
tion of  their  respective  interests  as  entireties. 

Section  5.  When  the  interest  of  a mortgagee  in  any  real  estate  shall 
be  separately  assessed  and  taxed  as  provided  in  this  act,  the  tax  on 
such  interest  shall  constitute  a lien  upon  such  real  estate  the  same  as 
other  taxes  upon  real  estate,  and  the  collection  thereof  may  be  enforced 
the  same  as  other  taxes  upon  real  estate.  Such  tax,  if  uncollected,  shall 
be  separately  returned  as  delinquent;  but  at  the  tax  sale,  if  unre- 
deemed, the  interest  of  the  mortgagor  and  the  mortgagee  shall  be  sold 
together  for  the  amount  of  taxes  on  both  interests,  with  interest  and 
charges  thereon,  and  a single  certificate  of  sale  shall  be  issued  thereon. 
The  mortgagor  may  pay  the  tax  on  the  interest  of  the  mortgagee,  or 
may  redeem  the  land  from  the  lien  of  such  tax  after  its  return  as 
delinquent.  The  amount  so  paid,  with  interest  thereon  at  the  rate 
specified  in  the  mortgage,  shall  be  lawful  offset  in  favor  of  the  mort^ 
gagor  against  the  indebtedness  secured  by  such  mortgage  and  may  be 
deducted  from  any  amount  then  due  or  thereafter  to  become  due  on 
such  indebtedness. 

S'ection  6.  The  second  clause  of  section  1056  of  the  statutes  of  1898 
is  hereby  amended  so  as  to  read  as  follows:  To  determine  the  amount 


— 32  — 


of  money  and  of  debts  due  and  to  become  due,  other  than  debts  secured 
by  mortgage  or  other  conveyance  of  real  estate  in  this  state,  for  which 
any  person  should  be  assessed,  and  the  amount  of  bona  fide  and  un- 
conditional debts  owing  which  any  person  may  be  entitled  to  deduct 
from  credits  as  exempt,  such  person  shall  be  required  to  make  a state- 
ment thereof  under  oath,  giving  the  average  amount  of  such  moneys 
and  of  such  debts  due  and  to  become  due  other  than  debts  secured  by 
mortgage  or  other  conveyance  of  real  estate  in  this  state  owned  or  held 
by  him,  and  the  average  amount  of  debts  by  him  owing  which  he  may 
be  so  entitled  to  deduct,  for  each  and  every  month  during  the  year  end- 
ing on  the  first  day  of  May;  and  the  average  amount  for  such  year,  so 
determined,  shall  be  assessed  for  taxation. 

Section  7.  The  exemption  on  account  of  debts  owing  provided  in 
subdivision  10  of  section  1038  shall  not  be  allowed  in  respect  to  any 
mortgage  required  to  be  assessed  as  an  interest  in  real  estate  under 
the  provisions  of  this  act,  nor  in  reduction  of  or  offset  to  the  indebted- 
ness secured  by  any  such  mortgage. 

Section  8.  All  provisions  of  law  whereby  mortgages  of  real  estate 
held  by  insurance  companies  or  other  persons  or  associations  are  ex- 
empted from  taxation,  either  expressly  or  by  necessary  implication 
shall  remain  unaffected  by  the  provisions  of  this  act. 

Section  9.  The  provisions  of  this  act  shall  not  apply  to  mortgages 
upon  property  assessed  by  a state  board  of  assessment  nor  to  mort- 
gages upon  property  of  persons,  associations  or  corporations  taxed  by 
license  fee  or  other  special  method  in  lieu  of  taxation  upon  such  mort- 
gaged property,  but  shall  apply  only  to  mortgages  upon  property  sub- 
ject to  direct  assessment  and  taxation  under  the  general  assessment 
and  tax  laws  of  the  state. 

Section  10.  This  act  shall  take  effect  and  be  in  force  from  and  after 
its  passage  and  publication,  and  shall  apply  to  the  assessment  to  be 
made  in  the  year  1903. 

Approved  May  21,  1903. 


30 


12  105279977 


III 


